ERIC EDWARD HOTUNG v. HO YUEN KI AND OTHERS

HCA 571/2003 & HCMP 2820/2002
& HCMP 4511/2002 (Consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 571 OF 2003

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D E C I S I O N

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Introduction

1.  The taxation of the order for costs of Hon Tang JA (sitting as an additional judge of the Court of First Instance) of 17 June 2005, tortuous in its progress, has raised further issues for determination.

The Issues

2.  Mr. Chain, counsel for the Plaintiff paying party has urged the court to exercise its discretion to either totally disallow or to order but minimal interest on the taxed costs on two bases.

3.  The principal argument runs thus.  As the 2^nd Defendant has paid no more than about $400,000 to his solicitors to fund the litigation, he is out of pocket only to that extent.  It follows therefore that no interest should be paid as a matter of fairness except on that amount and thereafter no interest should accrue on the balance of the taxed costs until taxation.  Mr. Egan, counsel for the 2^nd Defendant, updating the amount that has since been paid by the 2^nd Defendant to about $900,000, contends that the quantum paid by his client is entirely irrelevant, there being no power conferred on the taxing master to vary interest on taxation.  Mr. Chain argues otherwise.

4.  Mr. Chain’s secondary argument is premised on undue delay.  There are two aspects to his contention.  Firstly, he submits that there was dilatoriness in presenting a proper bill for taxation.  Secondly, the cross-examination could have been dispensed with or could have been completed expeditiously had the 2^nd Defendant accepted much earlier on that the dispute over the nature of the retainer could have been resolved by reference to the retainer and its attending circumstances.  Mr. Egan submits that no inordinate or inexcusable delay in prosecuting the taxation has occurred.

5.  Briefly summarized, those are the conflicting positions.

Jurisdiction to vary interest

6.  S. 49 of the High Court Ordinance, Cap. 4 is the provision giving jurisdiction to the High Court to order interest on judgment debts.  It reads:

Interest on judgments

(1)  Judgment debts shall carry simple interest –

(a)  at such rate as the Court of First Instance may order; or (amended 25 of 1988 s. 2)

(b)  in the absence of such order, at such rate as may be determined from time to time by the Chief Justice by order,

on the aggregate amount thereof, or on such part thereof as for the time being remains unsatisfied from the date of the judgment until satisfaction.

(2)  Interest under this section may be calculated at different rates in respect of different periods.

7.  It has been judicially determined that an order for costs to be taxed is, for the purpose of s. 49, a judgment debt and interest runs from the date of the costs order: Caltex Oil Hong Kong v Director of Buildings and Lands [1994]HKDCLR 31.  At page 42 (line 25-35) of the judgment, His Honour Judge Cruden in setting out his reasons for so holding, observed:

“The Tribunal having held that there is no material difference between s. 49 of the Supreme Court Ordinance and s. 17 of the Judgments Act 1838, it follows as a matter of stare decisis, that the House of Lords judgments on s.17, are at least of powerful persuasive authority, if not strictly binding.  The House of Lords in Hunt v Douglas (Roofing) Ltd., agreeing with the Court of Appeal in Erven Warnink BV v Townend & Sons (No.2) held that the words “judgment debt” in s. 17 applies to costs and that interest runs thereon from the date of the order for payment of costs to be taxed.”

8.  Hon Tang JA, not having stipulated the applicable interest rate when ordering costs to be taxed, must have intended the statutory rate to apply, such rate to be determined by the Chief Justice from time to time under s. 49.  In short, the interest rate or rates accruing on the taxed costs until full settlement have been determined.  It cannot now be argued that the rate of interest can somehow be revisited and determined afresh by this court.  The court simply has no jurisdiction to do so on a plain reading of the section.  Its task is to quantify the costs payable pursuant to the order and that has been accomplished.

9.  The power to determine the interest rate accruable on judgment debts is conferred on “the Court of First Instance”, a term defined by s. 2 of Cap. 4 to mean the Court of First Instance of the High Court.  Whilst it has been correctly observed that the Registrar and masters of the High Court are empowered to exercise the same jurisdiction as may be exercised by a judge sitting in chambers, except in respect of certain matters listed under sub-paragraphs (a) to (f) of O.32 r.11 and that the question of interest rate falls without those exceptions, I am not persuaded that it was the legislative intent to include the Registrar and Masters under s. 49(1)(a).

10.  Mr. Chain’s contention on jurisdiction therefore falls away.

Delay

11.  Where there has been undue delay in the preparation of the bill of costs, the taxing master has a very wide discretion under O. 62. r.22(3) to make any appropriate orders, including disallowance of any items in the bill, disallowance of the costs of taxation, allowance of the costs of taxation to the paying party and disallowance of taxing fees.  This punitive jurisdiction is exercisable on proof of inordinate or inexcusable dilatoriness on the part of the receiving party in proceeding to taxation failing agreement on costs or where prejudice to the paying party is established.  The sanctions that may be imposed in my considered view do not run to varying the interest rate or to suspending the period of accrual as urged.  The court’s disapproval is to be reflected in the reduction or disallowance of costs.

12.  The bill of costs was filed in March 2006, some 8 months after the costs order of 17 June 2005.  In the interim, clarification had to be sought from the trial judge before his order could be sealed.  The bill, complex and lengthy running to 270 odd pages would have taken some time to compile.  It covered the costs of both sets of solicitors and there was clearly some difficulty obtaining the files from the 2^nd Defendant’s former solicitors.  The time taken for preparation of the bill cannot therefore be said to be unreasonable.

13.  The bill was amended quite substantially in February 2007.  That bill was subsequently taxed.  In the circumstances of the case, I am unable to find that there has been any inexcusable or inordinate delay of the kind asserted or that the 2^nd Defendant has by his own conduct or that of his legal representatives unreasonably and unnecessarily prolonged the taxation process so as to warrant the court’s interference, particularly given the parties’ entrenched and combative positions throughout and the Plaintiff’s requirement for cross-examination.  As for the Plaintiff’s complaint that the 2^nd Defendant would be benefiting unduly from interest accruable on fees paid by the 3^rd and 5^th Defendants to the lawyers, the short point is that the bill of costs was taxed pursuant to the learned judge’s order with the taxed costs representing no more than what the 2^nd Defendant would have been properly entitled to.

14.  The Plaintiff’s application is accordingly dismissed.  As to costs, I shall give counsel an opportunity to address me.